Diners Club
Encyclopedia
Diners Club International, founded as Diners Club, is a charge card
Charge card
A charge card is a card that provides an alternative payment to cash when making purchases in which the issuer and the cardholder enter into an agreement that the debt incurred on the charge account will be paid in full and by due date or be subject to severe late fees and restrictions on card...

 company formed in 1950 by Frank X. McNamara, Ralph Schneider and Matty Simmons
Matty Simmons
Matty Simmons is a former newspaper reporter for the New York World-Telegram and Sun, and Executive Vice President of Diner's Club, the first credit card company...

. When it first emerged, it became the first independent credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

 company in the world that established an idea of self-sufficient company producing credit cards for travel and entertainment.

History

The first credit card charge was made on February 8, 1950, by Frank McNamara, Ralph Schneider and Matty Simmons at Major's Cabin Grill, a restaurant adjacent to their offices in the Empire State Building
Empire State Building
The Empire State Building is a 102-story landmark skyscraper and American cultural icon in New York City at the intersection of Fifth Avenue and West 34th Street. It has a roof height of 1,250 feet , and with its antenna spire included, it stands a total of 1,454 ft high. Its name is derived...

. McNamara was bought out two years later by department store heir Alfred Bloomingdale, who resigned several years later. Schneider died in the early 1960s. Simmons resigned in 1967 to form the publishing company that became National Lampoon. During that approximately 20-year period, these four men were the only major participants in the Diners Club operation.

Diners Club created what would later be dubbed the "travel and entertainment" card market, which focused on frequent travelers with a substantial income to pay for other high-value charges. As these customers had no need to pay for purchases over time, these cards required that the entire balance of the bill be paid upon receipt. This type of account is known today as a charge card
Charge card
A charge card is a card that provides an alternative payment to cash when making purchases in which the issuer and the cardholder enter into an agreement that the debt incurred on the charge account will be paid in full and by due date or be subject to severe late fees and restrictions on card...

. Diners Club's monopoly was short-lived, however, as American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...

 and Carte Blanche (which later partnered with Diners Club) began to compete with Diners Club in the T&E card market. American Express now dominates the "member card" arena, providing thousands of customers with cards that require the monthly balance be paid in full.

Diners Club also faced competition from banks that issued revolving credit
Revolving credit
Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Examples of revolving credits used by consumers include credit cards. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day...

 cards through BankAmericard (later renamed VISA
VISA (credit card)
Visa Inc. is an American multinational financial services corporation headquartered on 595 Market Street, Financial District in San Francisco, California, United States, although much of the company's staff is based in Foster City, California. It facilitates electronic funds transfers throughout...

), and Interbank MasterCharge (later renamed MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...

) towards the end of the 1960s. Diners Club began early on to allow franchises of the Diners Club name, at first in Europe and later throughout the world, for many years eclipsing the BankAmericard or Interbank MasterCharge networks abroad. Amoco
Amoco
Amoco Corporation, originally Standard Oil Company , was a global chemical and oil company, founded in 1889 around a refinery located in Whiting, Indiana, United States....

 also issued for a time its own co-branded Diners Club cards called American Torch Club, as well as Sun Oil Company with its version called Sun Diner Club Card.

Diners Club International, the franchisor that holds rights to the Diners Club trademark, was acquired in 1981 by Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...

, a unit of Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

, as well as many of the largest franchises worldwide, although a majority of its franchises abroad remain independently owned.

Acquisition by Discover Financial Services

In a transaction completed July 1, 2008, Discover Financial Services purchased Diners Club International from Citi for $165 million. The deal was announced in April 2008 and approved by the U.S. government in May 2008. By merging the North American Discover Network with the international Diners Club Network, Discover created a global payment processing system. Discover Bank has no plans to issue Diners Club-branded cards which continue to be issued by Diners Club International licensees, including Citibank.

MasterCard alliance

In 2004, Diners Club announced an agreement with MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...

. Diners Club cards issued in the United States and Canada now feature a MasterCard logo and 16-digit account number on the front, and can be used wherever MasterCard is accepted. Cards from other countries continued to bear a 14-digit account number on the front, with the MasterCard logo on the back. However, since the takeover of Diners Club International by Discover Financial Services, these cards have had the Discover logo on the back.

Carte Blanche

Carte Blanche originated as a travel and entertainment card owned by Hilton Hotels
Hilton Hotels
Hilton Hotels & Resorts is an international chain of full-service hotels and resorts founded by Conrad Hilton and now owned by Hilton Worldwide. Hilton hotels are either owned by, managed by, or franchised to independent operators by Hilton Worldwide. Hilton Hotels became the first coast-to-coast...

, and competed with American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...

 and Diners Club. Hilton sold the companyto Citibank for a brief period during the 1960s, and repurchased it in 1979. The card was phased out of service in the late 1980s.

Throughout most of the 1960s and 1970s, the Carte Blanche card was considered to be a more prestigious worldwide travel and entertainment card than American Express or Diners Club, though its small cardmember base hindered its success. Carte Blanche also was the first to implement a "Gold Card" program, but initially only as a means to recognize cardholders who were frequent users and paid their bills on time. In 2000, the Carte Blanche name was revived in the United States when Diners Club, which was also acquired by Citibank in 1981, introduced an upscale version of its card: the Diners Club Carte Blanche Card. It is an upper-level charge card on par with the American Express Platinum card. The card carries a US$300 annual fee and offers an extensive menu of perks geared toward spendthrift travelers. It is accepted wherever regular Diners Club cards are accepted. Although Diners Club requires payment in full within 30 days, corporate accounts can pay within 60 days without penalty.

enRoute

Diners Club expanded its customer base in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 by acquiring the enRoute card from Air Canada
Air Canada
Air Canada is the flag carrier and largest airline of Canada. The airline, founded in 1936, provides scheduled and charter air transport for passengers and cargo to 178 destinations worldwide. It is the world's tenth largest passenger airline by number of destinations, and the airline is a...

 in 1992, and marketed the card under the combined name for a period of time as the "Diners Club/en route Card". The enRoute business was valued at over $300 million. Diners Club remains a minor player in Canada.

Acquisition by BMO

In November 2009, Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...

 announced that Diners Club International's North American franchise has been sold to Bank of Montreal
Bank of Montreal
The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it...

(BMO). The deal gives BMO exclusive rights to issue Diners cards in the U.S. and Canada. At the time, BMO said the Diners Club fits well with its existing commercial card business, adding that commercial cards are one of the fastest growing segments in the credit card business.

Switzerland and Germany franchise

In a transaction that closed on August 6, 2010, Citi Bank sold both the Switzerland and Germany franchises to a private investment group headed by Anthony J. Helbling.

External links

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